The Federal Government has just announced in its 2024 Federal Budget that it will make 30-year amortized mortgages available for first-time buyers but ONLY on new construction. This is a positive step in the right direction as it signifies the importance of this specific buyer demographic to the economy’s stability but does it do enough?
For the construction industry, this small policy change may have profound and positive ramifications. This regulatory change may foster the development of a specific housing type that places focus on more attainable and affordable construction types but development is not equal across all regions leaving this change to be more exclusionary, and I would opine, discriminatory. So what’s the answer?
The answer is simple and may have a far greater impact than the current proposed legislation – making available 30-year amortized mortgages for first-time buyers for both new construction and resale homes.
Opening up 30-year amortized mortgages for first-time buyers across both new development and resale homes could indeed be a more effective way of improving accessibility for this demographic, considering the regional specificity of development and the varied preferences of homebuyers. Here’s why:
- Broader Accessibility: Extending 30-year amortized mortgages to both new development and resale homes increases accessibility for first-time buyers by offering them more options in the housing market. This flexibility allows buyers to choose from a wider range of properties, including newly constructed homes and existing residences, based on their preferences, budget, and location preferences.
- Regional Variability: Development patterns and housing supply differ across regions, with some areas experiencing a higher concentration of new construction while others have more resale inventory. By allowing 30-year mortgages for both new and resale homes, first-time buyers in all regions have equitable access to financing options, regardless of the predominant housing stock in their area.
- Market Dynamics: In some regions, particularly urban centers with limited land availability, new construction may be limited, making resale homes a more practical option for first-time buyers. By extending 30-year mortgages to resale properties, buyers in these areas are not disadvantaged and can still benefit from longer amortization periods to enhance affordability.
- Consumer Choice: Opening up 30-year mortgages for both new and resale homes empowers first-time buyers to make informed decisions based on their individual circumstances and preferences. Some buyers may prefer the customization and warranty protections offered by new construction, while others may prioritize established neighborhoods and character homes available in the resale market.
- Market Stability: Promoting accessibility to both new and resale homes contributes to market stability by fostering a balanced housing ecosystem. This approach mitigates the risk of oversupply in new construction markets while also supporting the resale market, which plays a crucial role in providing housing options for buyers at all stages of life.
Overall, by extending 30-year amortized mortgages to both new development and resale homes, policymakers can promote greater inclusivity, flexibility, and stability in the housing market, ensuring that first-time buyers have equitable access to financing options regardless of regional differences in development patterns and housing supply. Right now first-time buyers are struggling to enter the housing market due to high rates, inflationary pressures, high market values, and low housing supply. The demand is only growing so it’s imperative that all levels of government recognize these challenges and adapt where possible. One thing is for sure, by allowing first-time buyers entry into the housing market, we will help to free up rental stock and provide market & economic stability to a demographic that is essential to the Economic health of our community.
Kari Gares, Mortgage Broker
Verico Mortgage House – Kari Gares
